A put option (usually just called a "put") is a financial contract between two parties, the writer (seller) and the buyer of the option. The buyer acquires a short position by purchasing the right to sell the underlying instrument to the seller of the option for specified price (the strike price) during a specified period of time.
If the option buyer exercises their right, the seller is obligated to buy the underlying instrument from them at the agreed upon strike price, regardless of the current market price. In exchange for having this option, the buyer pays the seller or option writer a fee (the option premium).
By providing a guaranteed buyer and price for an underlying instrument (for a specified span of time), put options offer insurance against excessive loss. Similarly, the seller of put options profits by selling options that do not become exercised. Such is the case when the ongoing market value of the underlying instrument makes the option unnecessary; i.e. the market value of the instrument remains above the strike price during the option contract period.
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